Change is a constant presence on Wall Street. Over the recent three-year span, the S&P 500 has resembled a roller coaster ride. While its general trajectory has been upward, akin to the index’s historical trend, it certainly hasn’t followed a linear path. This dynamic nature prompts analysts to perpetually strive to foresee the market’s direction, thereby guiding decisions on which stocks to retain and which to procure.
The index encountered a substantial 33% decline in value during the weeks subsequent to the declaration of the pandemic. It then embarked on a remarkable ascent throughout the entirety of 2021. This surge was succeeded by a market downturn last year, only to experience a resurgence this year. As of 2023, the widely observed benchmark index finds itself 15% higher than its starting point. Nonetheless, Wall Street is cautioning investors that specific stocks might not partake in the forthcoming growth. In reality, these stocks are labeled as ones to sell or to avoid, as indicated by their projected price targets. Analysts are sounding the alarm about the following trio of stocks that could potentially plummet within the next 12 months.
C3.ai (AI)
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The realm of artificial intelligence (AI) has gained significant attention, particularly since the advent of ChatGPT. Few equities have harnessed this trend as effectively as C3.ai (NYSE:AI) has this year. The company’s announcement of a suite of generative AI products, akin to ChatGPT’s capabilities, triggered a considerable surge in its shares. Despite experiencing a one-third decrease from recent peaks, the stock’s year-to-date performance still showcases a notable 194% increase.
Analysts anticipate the potential for further decline. Joshua Tilton, an analyst at Wolfe Research, set a rather conservative target of $14 per share in April, a figure 42% below the prevailing price. Tilton highlighted the vulnerability of C3.ai’s revenue growth for 2024 due to a “negative macro outlook.” The tightening of corporate expenditures poses a threat to the adoption of C3.ai’s recently introduced consumption model.
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The company, which previously relied on a subscription-based model, is adapting to the evolving landscape. Chairman and CEO Tom Siebel acknowledged the shift in cloud-based firms away from this model. C3.ai is aligning itself with this trend to mitigate revenue fluctuations. However, with increasing losses and dwindling operating margins, the company might experience downward pressure on its valuation even if it avoids reaching rock-bottom prices.
GameStop (GME)
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GameStop (NYSE:GME), the video game retailer, continues to be a favored target of Wall Street’s skepticism. This sentiment isn’t entirely baseless. Despite its enduring popularity among meme stock enthusiasts, GameStop’s future prospects remain dim. The company placed a substantial bet on cryptocurrency to salvage its fortunes. It launched a non-fungible token (NFT) marketplace for trading tokens and introduced a crypto wallet for storage. Regrettably, the company recently announced the discontinuation of wallet support due to uncertainties surrounding the regulatory landscape of cryptocurrencies.
In June, GameStop also ousted its CEO, who had held the position for merely a year. The resignation of its CFO followed suit last month. The company’s internal upheaval is mirrored in its stock performance, which has plummeted by 50% from its 52-week peak. Analysts Michael Pachter and Nick McKay from Wedbush have pegged a target price of $6.20 per share, foreseeing a gradual descent to $0.
“We remain convinced that GameStop is doomed, with declining physical software sales and a shift of sales to subscription services and digital downloads sealing its fate,” stated Pachter and McKay, who also noted the challenges in finding a suitable replacement for the departed CEO.
Apple (AAPL)
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Apple (NASDAQ:AAPL) consistently emerges on analysts’ radar when discussions turn to stocks with potential downside. However, these predictions often leave analysts with a sense of frustration, as the tech giant possesses a knack for springing surprises.
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Despite forecasts of dwindling iPhone sales, Apple’s stock remarkably surged by 50%. However, from August 1 onwards, it underwent a staggering 91% decline. Could this mark the substantial pullback that Wall Street has been anticipating?
National Bank Financial set a modest price target of $54 per share, back in January when the stock hovered around $125 per share. While this initially implied a 56% contraction, Apple’s subsequent significant surge amplifies this projection to a daunting 69% decline.
Nevertheless, several other analysts are inclined to predict further upside, advocating for a target price of nearly $200 per share. Kantar analysts posit that the industry is experiencing a downturn, citing a 14% year-on-year drop in global smartphone volumes through June. As services emerge as Apple’s future growth driver, a substantial pullback seems improbable in the near term.
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As of the publication date, the author of this article, Rich Duprey, did not hold any positions in the securities mentioned. The viewpoints presented herein are solely those of the author and adhere to InvestorPlace.com’s Publishing Guidelines.
Rich Duprey possesses two decades of experience in writing about stocks and investing. His work has been featured on Nasdaq.com, The Motley Fool, and Yahoo! Finance. Furthermore, U.S. and international publications, including but not limited to MarketWatch, Financial Times, Forbes, and USA Today, have referenced his insights.
